Bashar H. Malkawi, Jordan Imports and Traiff Regimes A Revisit by Bashar Malkawi

ARTICLE

Jordan Imports and Tariff Regimes: A Revisit

Bashar H. Malkawi*

Jordan made substantial market access commitments as part of its WTO membership negotiations. Jordan has low average tariffs with single or two digits
rate and ad valorem-only duties with some exceptions where specific duties apply. Customs standards in Jordan were streamlined in accordance with WTO
rules. Jordan confirmed in its accession to the WTO that free zones or export processing zones would be fully subject to the coverage of the commitments taken
in the protocol of accession. The purpose of this article is to examine and analyse Jordan’s current imports and tariffs regime.

1 INTRODUCTION made some degree of cuts several months from the date
it acceded, therefore securing for other countries some
When a country joins the WTO, it enjoys market access, immediate tangible results from the negotiations.
i.e. entry and exit rights. In return, an acceding country
must offer equivalent market access concessions. For pur- The tariff reductions did not require changes in
poses of tariff reduction, products and their tariff lines are Jordanian internal law. Customs Law of 1998 provides
grouped together into several categories in what seems to that goods entering Jordan will be subject to customs
be a sectoral approach.1 duties prescribed in the customs law, and if there is a
special provision for a tariff in an international agree-
Jordan made substantial market access commitments as ment to which Jordan is a party, a tariff shall be imposed
part of its WTO membership negotiations.2 It has low in accordance with the provision of such agreement.6
average tariffs with single or two digits rate, ad valorem- Additionally, Council of Ministers issues decisions
only duties with some exceptions where specific duties related to tariff changes.7 Regarding compliance with
apply, and nearly 100% tariff bindings.3 Jordan has bind- the WTO’s ITA, Jordan included its amended tariff
ing overhangs, difference between bound tariff rates and schedule in its WTO accession agreements, thus negat-
applied tariff rates, in its tariff schedule.4 To deal with ing the need to make changes in its internal law and to
sensitivities in tariffs reduction, Jordan was granted sta- submit separate modification documents to indicate
ging and product exclusion rights.5 While Jordan has a compliance as required by the WTO’s Information
longer implementation period for tariff reductions, it Technology Agreement (ITA).

Notes

* Dean and Professor of Law at the University of Sharjah, United Arab Emirates. He holds S.J.D in International Trade Law from American University, Washington College of
Law and LL.M in International Trade Law from the University of Arizona. Email: [email protected].

1 See Staging Annex, Jordan Schedule of Market Access on Goods, http://www.wto.org/english/thewto_e/countries_e/jordan_e.htm. It is unclear how Jordan made its decision to
group products and their tariff lines into categories and/or lower its import tariffs. Perhaps it fixed reduced import tariffs according to the situation or sensitivity of the
domestic industry defined by the level of import penetration, productivity, job losses, and prices.

2 This is despite Jordan’s efforts in convincing WTO members that further tariff cuts would damage its fragile economy in 1998 with mounting trade deficit.

3 Jordan agreed to impose zero or very low tariffs on all chemical products perhaps in light of the Chemical Tariff Harmonization Agreement of the Uruguay Round (‘CTHA’).
Specific duties, as opposed to ad valorem duties, are not transparent and have the effect of increasing trade protectionism.

4 Bound tariff rates are the maximum tariffs Jordan can apply under its WTO commitments. Applied tariff rates are the actual tariffs in place.

5 Jordan has a ten-year transition period for implementing reduction commitments. Tobacco and alcohol maintain high tariff peaks. See Daniel Pruzin, WTO Approves Accession
of Jordan to Trade Body, 17 Int’l Trade Rep. 29 (BNA) (6 Jan. 2000). See also Working Party Report, Report of the Working Party on the Accession of Jordan, WT/ACC/JOR/33,
para. 55 (3 Dec. 1999). It is noticeable that rather than outright prohibition on imports of tobacco and alcohol, Jordan opted to impose higher prohibitive tariffs between
150% and 200%.

6 See Customs Law No. 20 of 1998, Art. 9, infra n. 12.

7 Ibid., Art. 14.

308 Global Trade and Customs Journal, Volume 14, Issue 6
© 2019 Kluwer Law International BV, The Netherlands

Jordan Imports and Tariff Regimes: A Revisit

In total, Jordan made tariff concessions with regard to customs transactions.10 Jordan requires consularization
2,790 tariff lines for industrial products and 462 tariff or legalization of commercial bills by Jordanian consulates
lines for agricultural products.8 The imbalance of tariff and chambers of commerce in the country of exportation
concessions between industrial and agricultural products for goods intended for export to Jordan.11 Consularization
might be attributed to Jordan’s emphasis on industrial or legalization of commercial bills may not be warranted.
products in international trade rather than on agricultural It adds costs to traders and could be in effect a non-tariff
products. trade barrier.

Jordan’s average tariff ceilings represent what is prevailing Goods may enter Jordan for consumption, transit, ware-
in other Arab countries such as United Arab Emirates.9 housing, temporary importation, inward processing, or
These rates could provide trade negotiators with bargaining entry into a foreign trade zone.12 These different forms
leverage in future multilateral trade rounds, a pathway to of entry could be designed to serve the different interests
protect some domestic industries, raise revenue, and redis- of importers. Warehousing, entry into a foreign trade
tribute income. However, there would be one snag for rely- zone, and inward processing share one common feature,
ing on tariffs as bargaining leverage in negotiations. Over which is deferral of customs duties.13 Deferral of customs
several rounds, a large number of countries would have low duties may help the financial interests of importers.
tariffs, and thus Jordan would be deprived of bargaining
power. This is a scenario where the law of diminishing return The owner of imported articles or his designated
would apply. customs broker must file a customs declaration at the
port of entry.14 The customs declaration could be accom-
This article will examine Jordan’s current imports and panied by certificate of origin, bill of lading, or air
tariffs regime. The article will comment on the role of waybill. Imported articles cannot be withdrawn unless
customs law in terms of tariff classification and valuation. customs procedures are completed and duties are paid.15
Then, the article will examine rules of origin and draw- However, Customs Law of 1998 makes provisions for
back. Then, free economic zones will be analysed. This releasing imported articles before final payment of tariffs
article concludes with a set of recommendations and sug- or settling of other customs issues provided that payment
gestions in order to improve Jordan’s imports and tariffs of tariffs can be insured through cash, bonds or other
regimes further. financial guarantees.16 A system of posting financial
guarantees separates clearance of goods from customs
2 CUSTOMS LAW matters such as tariffs. Depositing financial guarantees
protects the government by securing tariffs owed and at
Customs law and procedures are important parts of the the same time expedites clearance of goods for importers.
trade system in Jordan. They regulate the flow of goods However, small importers may find it difficult to deposit
across the borders. One of the main functions of the financial guarantees.
Customs Department, an agency established in 1926
with 2,236 current staff members, is clearance of goods. Customs Law of 1998 provides the right of appeal
Importers seeking to introduce goods into Jordan must against Customs rulings initially within the Customs
file the appropriate documents and follow certain proce- Department.17 Additionally, decisions of the Customs
dures and entry techniques. In some instances, traders Department may be contested before the Customs
could face opaque customs procedures associated with Court.18 The emphasis should be placed on administra-
tive appeal, rather than judicial appeal, procedures

Notes

8 See Jordan Schedule of Market Access on Goods, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/JO_E.pdf.

9 The United Arab Emirates agreed to bind its tariff on all imported goods except in the case of some agricultural and dairy products (100%), alcohol, tobacco, and pork (200%).

10 See Pete W. Moore, Doing Business in the Middle East: Politics and Economic Crisis in Jordan and Kuwait 162, 166 (2004) (stating that some traders are concerned about the
increase in the size and power of the Customs Department. They claim that bureaucratic problems with the Department are legion. Sometimes, completing a customs
importation document requires seventeen signatures).

11 Jordan committed to phase out consularization of commercial bills by 31 Dec. 2002. See Working Party Report, supra n. 5, at 72. So far, Jordan has yet to rectify the practice
of consularization as it committed itself to on the first day of 2003. For example, as of 2016, embassy of Jordan in Washington, D.C requires legalization of commercial bills.
Legalization fee is USD 84 per document. Commercial bills must also be legalized by the National US-Arab Chamber of Commerce.

12 See Customs Law No. 20 of 1998, Art. 65, Official Gazette No. 4305 (1 Oct. 1998) as amended by Law No. 27 of 2000, Official Gazette No. 4443 (2 July 2000).

13 Ibid., Arts 88, 104, 122 & 133.

14 Ibid., Art. 61.

15 Customs procedures include inspection and laboratory testing and analysis. Ibid., Arts 69, 73 & 82. Inspection and testing of imported articles suggest delays depending on
the number of samples.

16 Ibid., Arts 75, 82, 83, 85 & 87.

17 A committee of three senior officials within the Customs Department would examine disputes concerning value, origin, characteristics or tariff classification of imported
articles. Ibid., Art. 80.a.

18 Customs Law of 1998 establishes Customs Court of First Instance and Customs Court of Appeal. In certain circumstances, decisions of the Customs Court of Appeal could be
appealed before Court of Cassation. Ibid., Arts 80.d, 222.a, 224.a & 225.

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which could resolve any customs-related dispute at 2.1 Tariff Classification and Valuation
quicker rates and lower costs for importers.
Every imported product that enters into Jordan must be
The Customs Department of Jordan is aggressively classified and valued. Selecting the appropriate tariff clas-
overhauling customs procedures by moving to upgrade sification is significant for an importer because it deter-
its customs facilities and automate some aspects of the mines the tariff rate that will be imposed. Usually, an
paper-based customs system. Moreover, it adopted many importer categorizes an imported article to provide the
concepts and practices of trade facilitation. For example, lowest tariff rate.
the Customs Department provides green lane treatment
to companies through expedited shipments free of or There are several means used to classify imported
with de minimis inspections upon arrival at ports of products. These include description, physical character-
entry.19 Movement and clearance of imported articles istic, and use. The issue of tariff classification leads to
would be based on risk-management technique, which divergent administrative and judicial interpretations.
is a methodical process for identifying high-risk Courts in Jordan render their decisions on the proper
shipments.20 The risk-management system would allow classification of imported products based on one or
speedy clearance of low-value or low-volume imports. It more of these means.
also allows speedy clearance for articles imported by a
reliable company that has a long history of compliance The question presented in one case pertained to the appro-
with the Customs Department rules. priate classification of an imported tractor for semi-trailers.23
The Customs Department divided the imported tractor for
Although the adoption of risk-management techni- semi-trailers into tractors classified under item 87/4 of the
ques are first steps in the right direction, it will take tariff schedule subject to 400 files per kilo weight and semi-
time and resources to truly effectuate these techniques. trailers classified under item 87/14 subject to 40% ad valorem
Additionally, since Jordan depends to a certain degree duty rate. The plaintiff contested that classification and
on tariffs, the role of the Customs Department will be claimed that the imported tractor for semi-trailers was prop-
devoted largely to collecting revenue for the treasury. erly classified under item 87/1/b duty-free.24 The Court of
Customs officials may delay imported articles for hours Cassation concluded that the imported tractor for semi-
or days awaiting verification as to classification and trailers fell under item 87/1/b based on the name, descrip-
valuation.21 tion, and the specific use of tractors for hauling semi-trailers
whereby a coupling device, located behind the chassis, is
The Customs Department makes available customs- used to hold semi-trailers.25 The Court of Cassation seemed
related laws, regulations, administrative rules, informa- to consider the tractor for semi-trailers as an entirety rather
tion on customs process, conditions for importation, than divided into parts because each part could not be used
charges applicable to Customs Law, tariff rates, tariff independently.
classification opinions, and bilateral and regional trade
agreements.22 The Customs Department provides In another case, the Court of Cassation affirmed the
advanced rulings based on request from traders who conclusion of the Customs Court of Appeal that imported
seek clarification on specific matters such as classifica- furniture should not be classified as medical furniture.26
tion and applicable tariff rates. Advance rulings prior to The importer claimed that the proper classification was
importation provide certainty and cut delays. This will medical furniture under tariff line 94/2.27 The Court of
help small and medium-sized companies before entering Cassation found that the goods were classifiable as ‘other
into commercial transactions. furniture’ under item 94/3 of the tariff schedule and

Notes

19 See Selectivity in the ASYCUDA System, http://www.customs.gov.jo/publication.asp (accessed 4 Mar. 2018).
20 See Customs Law No. 20 of 1998, supra n. 12, Art. 84. The idea of inspecting all imported articles is impractical and a poor use of limited resources. The risk-

management technique limits the physical inspection of imported articles. It includes random sampling at different rates. The technique starts with the Customs
Department when goods are imported and continues through inspection. All information related to goods will enter into a computerized system that will enable
later retrieval by inspectors.
21 Until there is further lowering of tariffs, there could be mistrust between customs officials and importers regarding smuggling and under-valuation for purpose of evading
payment of tariffs.
22 The information is available at the Customs Department website with translation in English. See http://www.customs.gov.jo.
23 See Journal of Jordanian Bar Association, Decision No. 95/1554, at 1368, issue no. 6 (1996).
24 Ibid., at 1369.
25 Ibid., at 1370.
26 See Journal of Jordanian Bar Association, Decision No. 94/1543, at 3451, issue no. 11 & 12 (1995).
27 The importer argued that the customs transaction indicated the value of each piece of the imported furniture at JD400, an amount that was high enough to
prevent use of the imported furniture at homes. Moreover, the importer claimed that since tariff line 94/2 used general description ‘medical, surgical, dental or
veterinary furniture’ and the examples listed in the tariff line were not intended to be exhaustive, the imported furniture should have been classified under tariff
line 94/2. Ibid., at 3453.

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should not be admitted duty-free. It noted that the The Court of Cassation in another case quoted the rule
imported furniture was metal tables with wheels. The of specificity in classifying imported tractor tracks.37 The
imported tractor tracks were described in two provisions
Court of Cassation further noted that imported furniture of the tariff schedule: tariff line 84/23 dutiable at 1% and
tariff line 87/6 dutiable at 30%.38 While the Court of
to be classified as medical furniture must be specially Cassation found the imported tractor tracks classifiable
designed and intended for medical and surgical use.28 under both tariff lines, it ruled that tariff line 84/23
most specifically described the tractor tracks.
The Court found that the imported furniture was of
broad nature and general use.29 The Court of Cassation also ruled on a case that involved
the classification of parts.39 In that case, imported products
An importer imported electrical machinery, including a were electric motors of TV aerials or antenna. The importer
radio with a sound recorder, from Japan.30 The Customs argued that the imported products should have been clas-
Department classified the imported radio with a sound sified under tariff line 85/a of the tariff schedule subject to
recorder under item 85/15 subject to 45% duty rate.31 The 20% duty rate. However, the Court of Cassation noticed
importer challenged the Customs Department’s classifica- that TV aerials or antenna fell under tariff line 85/15/c/a.
tion asserting that the imported radio and sound recorder fell The Court of Cassation decided that as a general rule of the
tariff schedule, imported parts that are fit only for use in
under item 85/15/a subject to 30% duty rate. The Customs specific products are classifiable under the tariff provision of
those products.40 As such, since electric motors are fit only
Court of Appeal found that the imported radio with sound for use in TV aerials, then electric motors were classifiable
under heading 85/15/c/a and thus dutiable at 40% duty
recorder should have been classified under tariff item 85/15/c rate. As noticed, the Court of Cassation addressed the case
subject to 30% tariff.32 However, the Court of Cassation did of imported parts that are fit only for use in specific
not agree with reading of the Customs Court of Appeal and product. Therefore, optional accessories or parts not fit
only for use in specific products do not necessarily fall
reversed its decision. First, it held that item 85/15 covered under the headings of these products.

radio and television machinery. According to the rules of In essence, customs classification of imported products is
about choosing between two or more competing tariff lines.
interpretation of the tariff schedule, the radio and television The Court of Cassation may consult rules of interpretation of
the integrated tariff schedule of the Arab League, opinions of
machinery category included the transmission apparatus the Customs Cooperation Council, scientific authorities,
testimony of witnesses, and other information to determine
incorporating sound recording apparatus subject to 45% the meaning of a tariff provision.41 The Court of Cassation’s
tariff.33 reasoning in classification cases deserves some note. The
Court of Cassation in some cases agreed with the lower
The Court of Cassation addressed the case of a product court decisions, while in other cases it overruled their deci-
described by reference to a component material.34 In that sions. In different sets of cases, the Court of Cassation upheld
and respected the decisions of the Customs Department
case, the imported product was worked gold covered with

zircon. In other words, the imported product consisted of

two components: gold and zircon. The Court found that

gold predominated and gave the imported product its
essential character.35 Accordingly, imported worked gold

covered with gems could be imported duty-free based on

the decision of Council of Ministers which permitted
importation of worked gold duty-free.36 Thus, the Court

of Cassation may have used value and quantitative analysis

in arriving at its conclusion. In other words, it may have

determined that gold in terms of value and quantity

exceeds other components such as zircon.

Notes

28 Ibid., at 3455.
29 Ibid., at 3456.
30 See Journal of Jordanian Bar Association, Decision No. 91/662, at 870, issue no. 4 & 5 (1993).
31 Ibid., at 872.
32 The Customs Court of Appeal decided that item 85/15/a included radio with gramophone and it did not explicitly cover sound recorder. Moreover, item 92/11 differentiated

between gramophone and other sound recorders. Thus, item 85/15/a included only radio wit gramophone and it did not include sound recorder. Ibid.
33 Ibid., at 873.
34 See Journal of Jordanian Bar Association, Decision No. 90/644, at 2186, issue no. 9, 10 & 11 (1991).
35 Ibid., at 2190.
36 The decision of Council of Ministers addressed importation of worked gold duty-free but did not address importation of worked gold covered with gems. Ibid.
37 See Journal of Jordanian Bar Association, Decision No. 93/993, at 2181, issue no. 9 & 10 (1994).
38 Ibid., at 2183.
39 See Journal of Jordanian Bar Association, Decision No. 93/1226, at 2205, issue no. 9 & 10 (1994).
40 Ibid., at 2208.
41 See Journal of Jordanian Bar Association, Decision No. 89/669, at 1193, issue no. 6, 7 & 8 (1991). See Journal of Jordanian Bar Association, Decision No. 95/1067, at 162,

164, issue no. 1, 2 & 3 (1996). See also Journal of Jordanian Bar Association, Decision No. 90/1104, at 2332, issue no. 12 (1991).

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which has the expertise in the field. In customs classification since it requires the Customs Department to release
cases, the plaintiff had the burden of proving that the imported goods immediately. Under the old valuation sys-
Customs Department’s classification is not right and that tem, customs officials had more discretion. Normal value
the claimed classification is correct. The Court of Cassation and databases pricing could be fixed at levels higher than the
used, on a case-by-case basis, different means to classify actual price of imported products, resulting in higher tariffs.
imports due to the wide variety of products. The new valuation system would leave little room for the
discretion of customs officials. Additionally, the new valua-
Once an imported product is properly classified, customs tion system should contribute towards more transparency.
value must be determined for the purpose of assessing the
appropriate tariff. Customs standards in Jordan were stream- Since Jordan did not have the advantage of additional
lined in accordance with WTO rules. Among the more time to set up the necessary infrastructure to ensure compli-
important changes was a standardized method for imposing ance, it faced some technical, administrative, and financial
duties. While in the past, seemingly questionable methodol- problems in implementing and complying with the compli-
ogies were used in customs valuation, now customs duties cated WTO Agreement on Customs Valuation.47 The
have become more predictable. Customs duties are based on implementation of the WTO Customs Valuation
the WTO Customs Valuation Agreement.42 Agreement stretched the capabilities of the already-under-
staffed Customs Department. The Customs Department had
Jordan shifted from the normal value scheme and database to retrain its personnel for the new valuation system. To
pricing to transaction value in computing tariffs.43 The meet concerns regarding fraud and undervaluation, Jordan
normal value calculated tariffs based on the price goods introduced post-entry audits so as to give customs officials
would fetch in an open market between a buyer and a seller the authority to audit accounts and commercial documents
independent of each other. In database pricing, customs to detect the accuracy of customs declarations. Moreover,
officials used prices stored and collected in databases to Jordan exchanged information with the exporting country
determine tariffs for imported products. Under the new on the value of export products.
customs valuation system, transaction value means that tar-
iffs levied on imports shall be based on the invoice price as 2.2 Rules of Origin
agreed on by the importer and the exporter.44
Rules of origin determine where an imported product has
Transaction value is the primary basis for determining been manufactured. This is important for many different
customs value. However, Customs Law of 1998 lays down reasons. For example, rules of origin determine whether
rules and guidelines on how to determine customs value preferential tariff rates would apply to products of coun-
whenever customs officials have reasonable ground to tries with which Jordan has free trade agreements. Rules
doubt the authenticity of the declared import value.45 of origin also play an important role in administering
Customs officials could use the price of product when sold trade remedy laws.
domestically or the computed value of the product in cases
where transaction value cannot be determined.46 Jordan committed in its accession to the WTO that it
would comply fully, as of date of accession, with the WTO
Customs valuation rules in Jordan mirror the language Agreement on Rules of Origin.48 The WTO Agreement on
concerning customs valuation as set out in the WTO Rules of Origin seeks to establish uniformity in the appli-
Customs Valuation Agreement. The new Jordanian valua- cation of non-preferential rules of origin.49 Until the har-
tion system has the advantage of stability and consistency in monization process is completed, WTO members apply
evaluating the value of imported products, and thus will
encourage trade. It could help speed the movement of goods

Notes

42 Jordan confirmed that it would fully implement the WTO Customs Valuation Agreement from the date of accession without recourse to any transitional period. See
Working Party Report, supra n. 5, at 94. According to Art. 20.1 of the WTO Customs Valuation Agreement, developing countries were given until 1 Jan. 2000 to
implement its provisions. However, the Customs Valuation Agreement contains provisions for extending the deadlines.

43 In mid-1996, a reference price database for valuation of products had been initiated, but this database no longer existed. See Working Party Report, supra n. 5, at 90.

44 Customs value could include the cost of loading, transport, and insurance as long as this is made on the basis of objective and quantifiable data. See Customs Law No. 20 of
1998, Art. 28.

45 Ibid., Art. 29.

46 Ibid., at 30.

47 See Lael Brainard, Ready for Launch? The Prospects for Global Trade Negotiations, 19 Brookings Rev. 14, 16 (2001) (implementing trade agreements can be extremely costly for
developing countries. Some estimate that a typical developing country must spend USD 150 million to implement just three of the WTO’s many agreements on intellectual
property, customs valuation, and technical standards).

48 See Working Party Report, supra n. 5, at 100.

49 The WTO Agreement on Rules of Origin established a three-year plan, undertook by the WTO Committee on Rules of Origin, leading towards global harmonization of
non-preferential rules of origin for some 5000 product tariff lines. The harmonization process should have ended in 1998. However, this deadline was extended until the
fourth WTO Ministerial Conference in Doha of 2001 or the end of 2001 at the latest as had been suggested by the Chairman of the Committee on Rules of Origin. See
Committee on Rules of Origin, 29 Nov. 2000, WTO Doc. No. G/RO/M/33, para. 2.1. However, the 2001 deadline and several other deadlines were passed without
achieving consensus over the harmonization work program. The newest deadline was fixed at the end of 2002. See Committee on Rules of Origin-Report by the Chairman of
the Committee on Rules of Origin to the General Council, 15 July 2002, WTO Doc. No. G/RO/52, para. 1.2.

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their own rules of origin subject to certain general princi- the products were manufactured in Portugal.55 However,
ples set out in Article 2 of the WTO Agreement on Rules if imported products have been subject to further manu-
of Origin. Additionally, Article IX of GATT 1994 sets facturing operations when passing through the territory of
forth rules for country of origin marking. a third country, then the imported products could be said
to originate in the third country depending on the nature
Generally, three tests are used to determine whether an of the manufacturing operations.
imported product originates in a named country. These
are substantial transformation, value added, and the Non-preferential rules of origin in Customs Law of
hybrid approach. Under the substantial transformation 1998 seem to avoid the subjective nature of the last
test, a product becomes the product of the most recent substantial transformation test by linking this transforma-
exporting country in which substantial transformation has tion to a change in tariff heading or meeting the appro-
occurred. A derivative rule of substantial transformation priate value-added content. Although the linkage may
test, known as tariff shift method, is a change in tariff achieve predictability and transparency in theory, it may
classification. The second test is the value added test in prove difficult in practice. Certificate of origin and other
which a product is considered to be of the last exporting export documents may further create more paperwork. For
country in which a specified percentage of value was example, certificate of origin could require listing specific
added. The final alternative method is the hybrid test, product, specific exporter and specific importer.
which combines substantial transformation and value Certificate of origin could be valid for one transaction
added tests. and for a limited duration. Moreover, due to the highly
technical nature of rules of origin, customs officials would
Articles 24–27 of Customs Law of 1998 provide the have to deal with complex cases on how imported pro-
legal framework for the application of rules of origin. ducts would qualify.
They spell out non-preferential rules of origin and leave
for every free trade agreement its own rules of origin 2.3 Drawback
test.50 A product is considered to originate in a country
if it is wholly grown, produced or manufactured in that Drawback is a refund or remission, in whole or part,
country.51 The ‘products wholly obtained’ rule is the easy under qualified circumstances of a customs duty, tax, or
rule of origin. It relates to products such as mineral fee that is paid on imported materials upon subsequent
products, some agriculture products, and sea products. exportation or used in the production of products that
are then exported. Drawback is not tariff deferral or
Due to the internationalization of manufacturing, a exemption – rather, it provides for reimbursement. The
product could be produced in more than one country. In purpose of drawback is to compensate exporters for
this case, the product is considered to originate from the customs duty paid on inputs. Drawback also reduces
country where it last underwent a substantial transforma- costs for manufacturers, thus enhancing competitiveness
tion by demonstrating tariff shift or minimum content.52 of domestic industries. Customs Law of 1998 provides
A product is considered to be substantially transformed if several types of drawbacks. It allows drawback on cer-
there has been a shift in tariff classification at the six-digit tain specific grounds.
level under the tariff schedule of Jordan rather than the
eight-digit level. A product is also considered to be sub- The first type of drawback is manufacturing drawback.
stantially transformed by meeting a 40% minimum value Manufacturing drawback occurs when certain imported
added. However, there are several criteria that may make materials are used in products manufactured in Jordan
meeting the last substantial transformation test and then exported.56 According to this type of drawback,
complicated.53 there are three conditions that have to be met to qualify
for a drawback. First, there must be importation of certain
A certificate of origin must accompany an imported materials. Second, imported materials must be used in
product.54 Transportation of imported products through manufacturing. Finally, the final product must be
the territory of a third country does not affect country of exported. Customs officials and courts would have to
origin determination. For example, shipment of article
rolls of Portuguese origin through a German port for
final destination in Jordan does not change the fact that

Notes

50 See Customs Law No. 20 of 1998, Art. 27.
51 Ibid., Art. 24.a.
52 Ibid., Art. 24.c. The rule of substantial transformation in Customs Law of 1998 reflects the WTO rules of origin system which is based on the principle of substantial

transformation.
53 For example, Customs Law of 1998 lists specific manufacturing operations such as minor processes which are deemed insufficient to confer origin. Ibid., Art. 24.c & d.
54 Ibid., Art. 26.
55 See Journal of Jordanian Bar Association, Decision No. 95/1241, at 194, issue no. 1, 2 & 3 (1996).
56 See Customs Law No. 20 of 1998, Art. 145.

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deal with issues such as defining manufacturing or (Chapters 6–14) covers vegetable products, and section three
imported materials for purpose of claiming drawback.57 (Chapter 15) covers animal and vegetable fats and oils.

Another type of drawback is same condition drawback.58 In the Harmonized System, goods are classified by what
Claim for same condition drawback exists when an they are: the Harmonized System nomenclature is logi-
imported product is exported in the same condition as cally structured by economic activity or component mate-
when it was imported. The crucial element for claiming rial. For example, animals and animal products are found
this type of drawback is ‘same condition’. Defining ‘same in one section and machinery and mechanical appliances,
condition’ may require engaging in analysing when and which are grouped by function, are found in another.
what type of manufacturing operations could render same Chapters of sections I to XV are grouped by biological
condition drawback inapplicable. structure or by the component material from which arti-
cles are made. For those chapters in which goods are
Customs Law of 1998 sets out other types of draw- grouped by raw material, a vertical structure is used in
backs. Drawback is allowed on imported products which which articles are often classified according to their degree
are exported for not conforming to specifications.59 of processing: raw materials, semi-manufactured, and
Further Customs regulations would have to detail elig- manufactured products. For example, Chapter 44 contains
ibility requirements, procedures for drawback claim, types items such as rough wood, wood roughly squared, and
of duties subject to drawback, and drawback rates. some wooden finished products such as wooden tableware.
Customs regulations would also have to list the type of Articles may also be classified according to the use or
products subject to drawback. function. The classification by function mainly occurs in
section XII and sections XVI–XXI. For example, section
2.4 Jordan’s Harmonized Schedule XVII contains Chapters 88 (aircraft) and 89 (ships).

Jordan uses the Convention on the Harmonized Jordan Harmonized Tariff Schedule (‘JHTS’) is updated
Commodity Description and Coding System as a basis for regularly extending over 9241 tariff lines.63 It is represented
its national customs tariffs.60 The Harmonized System is an in a tabular format incorporating four columns, each with
international six-digit commodity classification developed specific information. The first column is the H.S Code with
under the auspices of the Customs Cooperation Council.61 four and/or six digits. In other words, this column is the
Individual countries could extend it to eight digits for Heading/Subheading column. Jordan as part of its HS sys-
export purposes and to ten digits for customs purposes.62 tem, in some cases, replaced the fifth and/or the sixth digit
with ‘0’ or ‘00’ in accordance with Article 4.3 of the
The Harmonized System is divided into twenty-one sec- Harmonized System Convention. The second column is the
tions. Each of these sections groups together goods produced ‘article description’ column which contains description of the
in the same sector of the economy. Each section comprises product. The third column is ‘Collection Unit’ which deter-
one or more chapters, with the entire nomenclature being mines the unit of measure. The entire collection unit column
composed of ninety-seven chapters. Some chapters are in JHTS is based on value. The fourth column appears under
reserved for future use. For example, section one (Chapters the heading ‘Duty Rate’ which contains the different tariff
1–5) covers live animals and products thereof, section two rates that apply to the product in question.64 JHTS does not

Notes

57 The Court of Cassation established a test for determining whether a product is manufactured. In holding that freezing of vegetables did not constitute manufacturing the
Court of Cassation stated that manufacturing means change. There must be transformation into a new product in terms of its appearance, type or nature. See Journal of
Jordanian Bar Association, Decision No. 99/3084, at 205, 209–10, issue no. 1, 2 & 3 (2003). In another case, the Court of Cassation determined that if there was a
registration of customs declaration with the Customs Department for imported product, then there was importation. See Journal of Jordanian Bar Association, Decision No.
93/1482, at 2184, issue no. 9 & 10 (1994) (it is settled in jurisprudence that imported products are defined as foreign products that have been shipped from abroad and
entered the customs territory of Jordan accompanied with customs declaration registered with customs authorities as first step for clearance. Therefore, products are not
considered imported unless customs declaration is registered regardless of date of arrival or date of unloading).

58 Ibid., Art. 146.
59 Ibid., Art. 147.
60 The Convention entered into force on 1 Jan. 1988 with 36 contracting parties, including Jordan, ratified it. See Hironori Asakura, The Harmonized System and Rules of Origin,

27 J. World Trade 5, 8 (1993).
61 See The International Convention on the Harmonized Commodity Description and Coding System, 14 June 1983, 1035 U.N.T.S. 3.
62 Ibid., Art. 3.3.
63 The tariff schedule is accessible at the Customs Department website. See http://www.customs.gov.jo/downloads.asp.
64 The US bases its rates of duty into three different tariff levels for all importable goods based on classifications of countries. Column 1 tariffs apply on the basis of

MFN to all countries. Column 1 tariffs have been lowered over time through the GATT/WTO rounds of negotiations. Within column 1 there is a special rate of duty
for imports from countries that the US has a free trade agreement with such as Israel, Mexico, Canada, and Jordan or recipients of the Generalized System of
Preferences, the Caribbean Basin Initiative, and the Andean Initiative. Column 2 tariffs, the highest level of tariffs, apply to countries denied MFN status such as
non-market economies. Column 2 tariffs were enacted at the peak of the US trade protectionist era in 1930s. They have not been lowered since their implementation.
See Tariff Act of 1930, 497, 46 Stat. 590 (1930). The US harmonized tariff schedule is prepared for publication by the Office of Tariff Affairs and Trade Agreements
and published by the Office of Statistics of the ITC.

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Jordan Imports and Tariff Regimes: A Revisit

contain a column marked ‘stat. Suffix’ for collecting trade and alcoholic beverages, which are subject to prohibitive
data (Table 1). rates in the range of 50–180%, and unwrought gold,
which is subject to 0.5%. One can immediately notice that
Table 1 Jordan Harmonized Tariff Schedule (2018) Jordan’s tariffs are concentrated on few levels and do not
comprise a wide range. There is no multiplicity of tariff rates
H.S. Code Description Collection Duty that would involve many different types and levels of tariff.
Unit Rate Thus, JHTS structure renders greater tariff uniformity.

8527.00000 Reception apparatus for radio- In addition, imported products into Jordan are subject
telephony, radio-telegraphy or to general sales tax (‘GST’). On the basis of national
radio-broadcasting, whether or treatment principle, the same GST must be imposed on
not combined, in the same domestic products as well. However, if there is no local
housing, with sound recording production of the imported product, then the general sales
or reproducing apparatus or a tax on imported products will be a tariff-equivalent rate.
clock A special sales tax is imposed on certain imported pro-
ducts, such as vehicles, in addition to GST.
8527.10000 Other radio-broadcast receivers,
including apparatus capable of Perhaps the only complex part of Jordan’s tariff sys-
receiving also radio-telephony tem is that concerned with imported vehicles.
or radio-telegraphy Currently, imported automobiles are taxed, excluding
general and/or special sales taxes, at 10% to 30% duty
8527.12000 Pocket-size radio cassette- Value 30% rate depending on vehicle age or weight.67 For example,
players passenger cars less than five years old would be subject
to a 25% tariff rate. Trailers would be subject to a 10%
Other apparatus combined with 30% tariff rate. Buses and cars for transport of ten or more
8527.13000 sound recording or reproducing Value persons with diesel engine would be subject to a 15%
tariff rate. The vehicle tariff system does not use, for
apparatus example, a flat rate of 10% on all vehicles. Moreover, it
does not allow for a special tariff section for fuel econ-
8527.19000 Other Value 30% omy or hybrid vehicles.68

8527.20000 Radio-broadcast receivers not Customs personnel would compute the value of
capable of operating without an imported vehicles as a function of basic requirements.
external source of power, of a For 2004 models, price lists represented by car agents in
kind used in motor vehicles, Jordan would be used.69 Prior to 2004 models, pricing
including apparatus capable of must cover depreciation of equipment using a deprecia-
receiving also radio-telephony tion schedule. For example, while for 2005 models there is
or radio-telegraphy: no depreciation, for 2004 models an 85% depreciation
rate applies.
Almost 98% of JHTS is based on ad valorem tariff set as
percentage of the value of the imported product.65 For Jordan’s vehicle tariff system raises two interesting points.
example, if imported pocket-size radio cassette-players, First, it presumes that the declared value of a car is dubious. In
tariff line 852712000, valued JD100 were subject to other words, it presumes the guilt of an importer for fraud.
30% ad valorem tariff, then JD30 must be paid upon Second, it seems that the Customs Department uses price
importation. In few cases, Jordan’s HS has mixed or catalogues to determine the customs valuation of imported
compound tariff that consists of ad valorem tariff and vehicles. This might result in arbitrary customs values.
specific tariff, the latter being flat rate set per quantity Moreover, it seems that such reference prices are contrary to
or unit. For example, tariff line 010410000 of imported the WTO Customs Valuation Agreement which requires the
sheep is subject to 5% ad valorem tariff and JD2 per head. use of the imported goods’ actual transaction value, unless
Therefore, one could say that ad valorem tariffs cover most Jordan asked for WTO permission to continue applying
tariff lines in Jordan.

The JHTS does not contain quotas, meaning that Jordan
abolished quantitative import restrictions. It is a rationalized,
not a complex, tariff schedule.66 Tariffs rates are in the
following six bands: zero, 5, 10, 15, 20, and 30%, with
the exception of tobacco, manufactured tobacco substitutes,

Notes

65 Ad valorem tariff rate is assessed on the basis of CIF which includes the costs of imported products in the country of origin at the time of clearance plus any other costs
incidental to delivery at the port of entry in Jordan such as insurance and freight.

66 For example, Jordan’s tariff schedule does not have complex tariffs that would assess a tariff rate on the basis of a maximum or minimum rate or on the basis of a product’s
attributes.

67 See How can You make a Self-Assessment of Duties and taxes Payable on your car?, http://www.customs.gov.jo/viewins.asp?id=222&title=Instructions.

68 However, a note attached to the calculation method states that standard safety and environment equipments value is exempted from tariffs and general sales tax, provided it
does not exceed 15% of the car value. Ibid.

69 To calculate duties/taxes payable on a car, the customs department states ‘you should know the value of your car, which may not necessarily be the value you declared or the
car purchase price. It is in fact the price lists presented by car agents in Jordan for the brand new (2017) models’. Ibid.

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reference price on imported vehicles. One may predict that Most developing countries have begun to shift from
Jordan uses price catalogues for imported vehicles as a result of
consistent undervaluation by importers. import-substitution to export-looking trade policies.

In approaching future rounds of trade negotiations, One dimension of this has been the establishment of
Jordan may want to argue in favour of mathematical
formula (linear cuts) in which tariff rate applies across special economic zones for such economic activity as
the board with lower tariff cut per tariff line. The reason export promotion or industrial development.72 They are
for this approach is the nature of Jordan’s tariff schedule as considered to be one of the government’s development
it currently stands. Close to 2,131 tariff lines are above a tools to promote its exports. The purpose of these areas
20% tariff rate, while about 7,110 tariff lines are set
below that percentage. Therefore, harmonization formula, is to attract foreign capital, foreign technology, and man-
which applies higher cuts on higher tariffs and lower cuts agerial skills.73
on lower tariffs, may not be desired.
In this context, free zones in Jordan are governed by
There may also be a need to exempt certain imported
inputs from tariffs and other domestic taxes. It would reduce the Free Zone Corporation that manages economic,
production costs for domestic producers. In turn, this trade, and industrial affairs in the zones.74 The law,
approach would help Jordan’s manufacturing sector and
give it a much needed competitiveness through cost savings. moreover, rests the responsibility for the construction

3 FREE ECONOMIC ZONES of buildings and the provision of infrastructure and

Jordan confirmed in its accession to the WTO that free services upon the Corporation. The Corporation may
zones or export processing zones would be fully subject to
the coverage of the commitments taken in the protocol of be burdened by such obligations. To establish a free
accession.70 Free economic zone is a geographically
defined, isolated, enclosed and policed area where certain zone the Corporation may declare any area as a free
types of economic activity take place without some of the trade zone.75 Such an announcement shall specify
government taxation and regulations that applies to the
rest of the economy.71 In other words, it is considered to scope of activities to be carried out in the zone
be outside the national customs territory for purposes of concerned.76 Thus, the law allows for restrictions in
the tariff laws.
terms of types of activities that can be carried out in

the zone. In addition to storage and manufacture of

goods, the law allows economic operators in the zones
to provide services as well.77 Special conditions in terms

of impact on environment need to be attached to a
licensed enterprise in a free zone.78 Other conditions

include development, free zone-domestic market ties,
and labour skills.79

The law offers enterprises lucrative packages consist-

ing of an array of economic incentives. Enterprises are
exempted from paying income tax on profits.80 They

are permitted repatriation of investment or profits

Notes

70 See Working Party Report, supra n. 5, at 164.

71 See Free Zones Corporation Law No. 32 of 1984, Art. 2, Official Gazette No. 3280 (16 Dec. 1984), as amended by Provisional Law No. 41 of 2003, Official Gazette No.
4598 (15 May 2003).

72 See John R. McIntyre, Rajneesh Narula & Len J. Trevino, The Role of Export Processing Zones for the Host Countries and Multinationals: A Mutually Beneficial Relationship? X(4)
Int’l Trade J. 435, 440 (1996) (the first two zones established in developing countries were Mayaguez, Puerto Rico (1962) and Kandla, India (1965)).

73 One of the main benefits of establishing free economic zones is the relocation of production from developed to developing countries with the hope of exploiting the low cost
of labour. They also play an important part in the evolution of the new international division of labour. Another rationale for free zones is to generate foreign exchange
needed for debt servicing. Another impact on domestic firms results from the close contact with foreign firms. This leads to intra-firm growth and domestic sub-contracting.
However, the concept of special economic zones has been criticized on a number of grounds. The thrust of this criticism is that free economic zones have limited success in
the development of developing countries economies. First, most zones employ mainly low skilled workers with lax labour codes and health and safety standards. One of their
supposed advantages, the generation of employment through the attraction of foreign firms, has its limitations in terms of the type of jobs generated and the long-term
sustainability of these jobs. As far as zone-host economy backward linkages are concerned, there is normally very little technology transfer from free zones to the host
country. The value of tax incentives granted to firms operating in free zones is also debatable. Therefore, the revenue forgone and social cost incurred in establishing free
zones could be higher than actual benefits. Ibid., at 441–52.

74 The Free Zone Corporation Board is composed of the Minister of Finance as chairman, the director general of the Free Zone Corporation, and members from the MIT,
Ministry of Finance/Customs Service, Ministry of Transportation, and the Central Bank. With regards to the governance of free zones there are three types: a free zone in
which management of investment is vested into the Corporation, a free zone in which a private company is responsible for its administration subject to the Corporation’s
regulations, and a free zone in which it is run by private-public companies. Ibid., Arts 4, 2 & 6. It is noticeable the absence of private sector representatives from the
composition of the Board. The Board is an organ of the government. As to free zone governance, it is questionable whether private operators have the necessary capital and
expertise to run free zones.

75 Ibid., Art. 4.a.

76 Ibid., Art. 4.f.

77 Ibid., Art. 2.

78 Ibid., Art. 4.g. However, the language as written does not permit challenges by environmental groups regarding the potential impact of increased economic activity as a
result of the establishment of a free zone. Absurdly, there is no specific provision on worker’s rights of domestic staff.

79 Ibid., Art. 13.b.

80 Ibid., Art. 13.c.

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Jordan Imports and Tariff Regimes: A Revisit

attributable to investments they make. Imports into a other countries due to the former’s desperate drive for
free zone are not to be subjected to tariffs and other foreign investment. Others would argue that any lost
types of taxes.81 The law is silent on the legal process revenue could be offset by any revenue generated
for the settlement of disputes between a licensed enter- through economic growth.
prise and the Corporation or between two or more
licensed enterprises within a free zone. 4 CONCLUSION

The free zones which have been established are divided In its accession to the WTO, Jordan modernized many
into public and private free zones. There are six public free aspects of its import and tariff regimes. Jordan has low
zones including Zarqa free zone established in 1983, average tariffs with single or two digits rate, ad valorem-
Sahab free zone established in 1997, Queen Alia Airport only duties with some exceptions where specific duties
free zone established in 1998, and Al-Karak free zone apply, and nearly 100% tariff bindings. To deal with
established in 2001. In addition to these public free sensitivities in tariffs reduction, Jordan was granted sta-
zones, there are twenty-five private free zones – for exam- ging and product exclusion rights. Customs law and
ple, Jordan-Indo Chemicals Company, Hejazi & Gousheh procedures are important parts of the trade system in
Company, Trans-Jordan Livestock Company, and the Jordan.
Private Free Zone at Jordanian airports.
As a result of reform, Jordan modified its requirement
Compliance with WTO commitments means eco- of consularization or legalization of commercial bills
nomic incentives such as tax breaks given by Jordan which may not be warranted. Consularization adds costs
through free zones, which are in fact investment- and to traders and could be in effect a non-tariff trade barrier.
export-promotion programs, are illegal (prohibited A system of posting financial guarantees separates
because of export-contingent subsidies or actionable between clearance of goods and customs matters such as
because they cause adverse effects). These programs tariffs. Depositing financial guarantees protects the gov-
have to be phased out under Article 27.4 of the WTO ernment by securing tariffs owed while at the same time
SCM Agreement which mandates that developing coun- expediting clearance of goods for importers. Small impor-
tries, with the exception of sub-Saharan African coun- ters may find it difficult to deposit financial guarantees.
tries, phase out export subsidies within an eight-year Therefore, small importers should be exempted from
period in a progressive manner ending 1 Jan 2003. financial guarantees.
However, the Subsidies and Countervailing Measures
(SCM) Agreement permits developing countries to seek The emphasis in settling customs disputes should be
an extension of the deadline provided that requests are placed on administrative appeal, rather than judicial
submitted at least a year before the expiration of the appeal, procedures which could resolve any customs-
deadline.82 As such, Jordan may request a waiver for its related dispute at a quicker rate and at lower costs for
export subsidies facilitated through free zones.83 importers. Movement and clearance of imported articles
Ultimately, though, Jordan has to phase put these would be based on risk-management technique, which is a
programs. methodical process for identifying high-risk shipments.
Therefore, the Customs Department in Jordan would
In a bid to attract foreign companies, tax incentives provide green lane treatment to companies through expe-
such as preferential corporate income tax rate, reducing dited shipments free of or with de minimis inspections
corporate taxes, long income tax holiday, deducting upon arrival at ports of entry.
expenses approved for training and research, and valuable
deductions for capital costs such as depreciation and The Customs Department makes available customs-
inventory expenditures for companies operating in indus- related laws, regulations, administrative rules, information
trial parks and export processing zones would interfere on customs process, conditions for importation, charges
with the neutrality of the tax system in Jordan. applicable to Customs Law, tariff rates, tariff classification
Moreover, these incentives mean less revenue for the opinions, and bilateral and regional trade agreements.
government. Some would argue that in putting these
incentives in place Jordan must be cautious not to fall Customs classification of imported products is about
in the trap where multinationals play Jordan against choosing between two or more competing tariff lines.

Notes

81 Ibid.

82 Decisions regarding granting extensions are made by the Committee on Subsidies and Countervailing Measures with extension reviewed annually.

83 In Nov. 2004, the Committee on Subsidies and Countervailing Measures took the action of extending export subsidies by developing countries, including Jordan, for an
additional year until the end of 2005. See Transition Period Extended for Export Subsidies of Developing Countries, 4 Nov. 2004, WTO News. At the Doha Ministerial
Conference of 2001, in response to demands from developing countries, members agreed to provide more flexible terms for requests of extension than those set in the SCM
Agreement. Now, approved requests would be renewed on annual basis automatically until 2007 on the condition that the country concerned does not modify its subsidy
program in order to make it more favourable to domestic companies and that transparency obligations are met in terms what type of measures a country wants to keep in
place. Additionally, the export subsidy program must be in the form of full or partial exemptions from tariffs and internal taxes. It must be in existence before 1 Sept. 2001.
Finally, the country in question must not have a share in world merchandise trade exports of more than 0.10% or USD 20 billion gross national income for 2000.

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318